Economic and fiscal policy minister Heizo Takenaka suggested Sunday that he supports the Finance Ministry's plan to implement tax cuts for some two years from fiscal 2003 before hiking taxes to balance tax revenues.
Takenaka said during a debate here, "We shouldn't go too far. (Leaving taxes cut for) a longer time would be meaningless."
The government is seeking to balance tax cuts and hikes over a multiyear period, nwhile the Council on Economic and Fiscal Policy has proposed completing tax reforms by fiscal 2006.
To balance tax revenues for four years from fiscal 2003 through fiscal 2006, tax cuts in the first two years would need to be offset by tax increases in the last two years.
Regarding the scale of the planned tax cuts for fiscal 2003, Takenaka said: "We should not go far beyond levels of little over 1 trillion yen or else later tax hikes will be terrible. It's impossible to raise taxes worth 3 trillion yen or 5 trillion yen."
Noting that tax cuts are one of a number of short-term economic stimulus measures, Takenaka warned that cutting taxes for a longer period could hamper corporate structural reforms.
He said the economy has slumped due to nonperforming loans held at financial institutions and faltering corporate competitiveness, along with other structural problems.